Bank of England apologises and orders inquiry into payment system crash – as it happened

Late breaking news.... the Bank of England has just issued a statement, apologising for “any problems” caused by today’s technical crash.

It also confirmed that every payment submitted to its Real-Time Gross Settlements (RTGS) system has been processed, thanks to the four-hour extension put in place.

Here’s the full statement from Threadneedle Street:

Bank of England statement – update on RTGS

RTGS closed at 20:00 hrs (BST).

All 142,759 payments submitted to RTGS today before the extended deadline have now been processed. The Bank has put in place extra steps to monitor the system at the start of the day tomorrow when RTGS will open at 06:00 hrs (BST) as usual.

The Bank apologises for any problems caused by the delays to the settlement of payments today and has launched a thorough, independent review of the incident.

And that really is all for tonight. We’ll be back tomorrow to see if the wheels of the financial system spin smoothly tomorrow, and to cover aftermath of this rare, unfortunate, and embarrassing systems crash. GW

I think’s all for tonight. What a day - I’m dubbing it Red-Faced Monday, given the embarrassment heaped on the Bank of England.

Our earlier summary covers the chaos caused after a vital payments system went wrong today:

Summary: A bad day for the Bank of England

Since then, we’ve had an apology from CHAPS (the “unsung hero” of the banking world) to customers, and home buyers, who were unable to get their payments processed.

And MPs continue to pile pressure on the Bank; the Treasury committee may decide to vet the person charged with investigating the biggest system crash in the City in years.....

I’ll update the blog again if there are more developments. Otherwise goodnight, and if you’ve been trying to move house today, good luck.....

CHAPS has just issued a statement, apologising for the disruption caused to its service by the problems at the Bank of England.

Phil Kenworthy, managing director of CHAPS Co says:

“Following the operational incident at the Bank of England earlier today, CHAPS would like to apologise for any delays any customers may have experienced with their payments and would ask that anyone impacted by this contact their Bank or Building Society for assistance.”

Kenworthy also reveals that CHAPS, which finally started working around 4pm today, managed to process more than 140,000 payments -- a typical day’s work. The decision to keep open late paid off.

“Today, CHAPS’ payments were held up for several hours due to technical issues in the Bank of England Real Time Settlement Central System. We are pleased to report that the problem was resolved mid-afternoon and, following an extension to the CHAPS processing day, just under 143,000 payments were settled - in line with the normal average day’s volumes.”

Just in.... the Bank of England has announced that a ‘thorough’ independent inquiry will be held into today’s system outage.

And the results will be published.

Today’s glitch may be fixed, but it still raises serious questions over the Bank of England’s competency.

Swaha Pattanaik and Dominic Elliott of Reuters BreakingViews argue that Andrew Tyrie and the Treasury Committee need to get tough. After all, the BoE hasn’t been slow to criticise others....

Former BoE Governor Mervyn King rapped Royal Bank of Scotland for an IT bungle which affected the lender’s customers in 2012.

The Financial Conduct Authority is now investigating what happened at RBS as a result.To avoid accusations of double standards, the BoE should submit to an equally rigorous inspection.

Andrew Tyrie, chairman of the UK parliament’s treasury committee, has called for the BoE to explain itself. An internal investigation is likely, but a third-party probe would be the best way to restore confidence.

James Quinn of the Telegraph warns that the Bank can’t just cover up the incident:

What this incident serves to highlight is the fragility of the Bank’s technology platform, a fragility that has been exposed in the most public of ways, despite the Bank’s initial reticence to discuss what had occurred.

Andrea Leadsom, Economic Secretary to the Treasury, has in the past lectured retail banks on the need to increase the levels of technology expenditure.

Is it now time for the Treasury - and the Treasury Select Committee, whose chairman Andrew Tyrie last night said he was writing to the Bank to find out what had gone on - to raise the same point with the Bank itself to ensure that such an unlikely problem does not happen again

Parliament’s Treasury Committee will be demanding answers to find out how the Real Time Gross Settlement system, such a vital part of Britain’s financial system, could fail today.

Committee chairman, Andrew Tyrie MP, says:

“A crucial part of the UK’s financial infrastructure failed for several hours today. I will be writing to the Bank of England to find out why.

“The whole economy depends on a reliable payment system. We need to have confidence that the cause has been found and addressed.”

Could governor Mark Carney be hauled to parliament? I do hope so...

The Bank of England has also confirmed that its Real-Time Gross Settlement system is (at last!) fixed.

They say:

The Bank of England confirms it is now processing payments through RTGS as normal. We have extended opening hours until 20:00 hrs (BST) to maximise the opportunity for settlement.

That’s not a guarantee that all the payments WILL be settled today.....

It’s official, the Chaps system is up and running.

That means the Bank of England must have (finally) fixed its Real-Time Gross Settlement system that underpins the UK financial system.

Here’s the official statement, which confirms that it will keep running until 7.40pm.

“The Bank of England’s RTGS system is now processing payments again following a resolution of the technical issue experienced earlier today. As such, CHAPS is now processing the backlog of payments and is confident that all payments submitted today will be processed today.

To help customers and to ensure payments can be processed today CHAPS is extending its operating times until 19.40 hrs. Customers are advised to contact their own bank for any queries they may have on their specific payments.”

The collapse of the Chaps system will have a knock-on effect on people trying to move house today, experts are warning.

Mark Hayward, managing director of the National Association of Estate Agents, fears a ‘cascade effect’, if payments due to be processed today are delayed until Tuesday.

This could mess up hiring a removals firm, or switching telephone, water, electricity and gas supplies.

Hayward explains:

“Whilst Monday is not the busiest day in terms of completions, the failure of the payments system for UK house purchases will have a cascading effect and it is likely any payments will now be held up for a day or more as money takes time to transfer, which also means a delay for those hoping to move. This week is half term for many, so it will be a time when a lot of people are trying to move house – no doubt it will be a frustration for those that are now delayed.

“The one part of a sale which is fixed is the completion date - with payments not being able to be processed today, this will not only have an effect in terms of the completion date moving, but also accompanying arrangements which may have been scheduled, such as moving support or van hire and the transfer of utilities to the new address.”

Two families selling their homes through Andersons estate agents in Sheffield are caught up in the uncertainty caused by the collapse of the Bank of England’s Chaps payment system.

My colleague Hilary Osborne has the story:

Both transactions are in the same chain and were set to complete today.

Kaye Orwin who is handling the sales, told The Guardian:

“The solicitors called to say that money had been put in the system from the purchase at the bottom of the chain but then it couldn’t come out.”

The sellers who were next up the chain, an 88-year-old woman and her son, were already packed and ready to go when things went wrong. “The removal van was sat on the driveway,” said Orwin.

“We’ve opened the garage and they are putting things in there for now. The buyers at the bottom of the chain have to be out of their rental home today”

Orwin said in more than 20 years selling homes she had never experienced this kind of problem.

The solicitors involved in the sale are now trying to find a solution so that the families can move even if the money has not been transferred by late afternoon.

Helen Neville, a solicitor at Hugh James, also fears that house completions could be delayed today:

Back to the problems at the Bank of England’s RTGS payments system.

Bank insiders say that the Bacs system, for electronic payments such as direct debts, is still working. As is Faster Payments, used for internet and telephone banking.

But the glitch is hampering the CHAPS system, which means that any bank or business trying to move large sums of money, or anyone trying to buy or sell a house today, is affected.

And we just have a statement from CHAPS -- pinning the blame firmly on the Bank of England. They are also planning to extend their operational day, in the hope of avoiding disruption.

They say:

“CHAPS is currently unable to process payments. This is due to the Bank of England temporarily pausing the RTGS settlement system to resolve a technical issue. CHAPS is currently liaising with the Bank of England who are working hard to resolve the issue – which means payments submitted today will be processed. CHAPS will be extending its operational day to enable its Participants to submit and receive CHAPS payment instructions later than normal.

Almost 80% of CHAPS payments (by value) are wholesale financial payments – both domestic and cross-border. Any customer who is waiting for a CHAPS payment to settle today should speak to their own bank.”

Ouch. IBM has just given the market a nasty jolt, reporting that sales have missed expectations and warned that it suffered a slowdown in September.

Revenues at the world’s largest technology services group fell 4% in the last three months, to $22.4bn.

And earnings per share have fallen 8% on a GAAP accounting basis.

Ginni Rometty, IBM chairman, president and chief executive officer admitted that “We are disappointed in our performance.”

She added:

We saw a marked slowdown in September in client buying behavior, and our results also point to the unprecedented pace of change in our industry.

While we did not produce the results we expected to achieve, we again performed well in our strategic growth areas – cloud, data and analytics, security, social and mobile - where we continue to shift our business. We will accelerate this transformation.”

And Wall Street isn’t impressed; IBM shares have tumbled almost 8% in pre-market trading.

IBM Reports 2014 Third-Quarter Results

It’s a worry, hours after German software maker SAP cut its 2014 operating profit forecast and warned that customers were shifting to new Cloud-based services faster than expected.

BREAKING NEWS: The computer system which the Bank of England uses to transfer large funds between commercial banks in the UK has suffered a technical outage.

It’s a major embarrassment for the BoE.

The Real Time Gross Settlement system is a vital cog in the wheels of the City, used by banks all the time to shift large amounts of money in the system.

It is part of the Bank’s Clearing House Automated Payment System, or CHAPS.

The outage means that large value inter-bank fund transfers can’t be made.

The Bank insists that payments will be made, so the public shouldn’t panic.

CHAPS describes itself as “unsung hero” of banking world, and celebrated its 30th anniversary this year.

It handles an average of £277bn of payments per day. Many of them are under £100,000 each -- such as housing purchases.

Here’s the Bank’s official statement:

The Bank of England has identified a technical issue related to some routine maintenance of the RTGS payment system and has paused settlement while we resolve it. We are working to address this issue as quickly as possible, and restart the RTGS payment system in a controlled manner. The most important payments are being made manually and we can reassure the public that all payments made today will be processed.

More reassuringly, the prices of Greek sovereign debt has strengthened, pushing down yields (the rate of interest on the debt).

10-year Greek bonds are yielding 7.97% this morning, down from 8.04% on Friday night.

They had soared, from around 6.6%, last week after it emerged that Greece might leave its bailout without a precautionary credit line.

From Athens, Helena Smith reports:

Although still early, investors it seems are not convinced that the debt-stricken country is going to be able to avoid political turbulence - or stand on its own feet if its exits its EU-IMF bailout programme as the government has announced.

Wading into the turbulence, German finance minister Wolfgang Schäuble warned in an interview published this morning that Greece will only convince markets if it forges ahead with promised reforms.

“Greece must resolutely continue to implement the agreed reforms. It is in its own interests. Being reliable creates confidence, also on the markets,”

Schäuble said when asked if it should give up planning to rely on emerging funds from lenders which include the ECB.

The debt-stricken country’s troika of creditors are due to return to Athens by the end of the month (and possibly as early as Friday) and are racheting up the pressure on the coalition government to take the immensely unpopular steps of further cutting pensions and making mass lay offs in the public sector.

In the face of market reaction, prime minister Antonis Samaras has been forced to counter suggestions that he will have to roll back on his idea of exiting the bailout, saying Greece does not need “a third memorandum [of financial loans]” and will enter talks with lenders over a precautionary credit line.

he said.

“Markets over-reacted and over-reaction will eventually give way to reality,”

‘If you look at recent official statement, no one is doubting that Greece has the foundation and prospects to advance. The discussion that is taking place is how we will proceed in the safest way possible.” <end>

The eurozone bond market is generally calmer today:

After a steady start, Europe’s main stock markets are on the slide again.

The German DAX and French CAC are both down around 1%, and even the FTSE 100 is lurking in negative territory, down around 26 points.

The market surge in Asia overnight (see earlier posts) has not rippled through to Europe and the City.

The news that Italy’s factory orders in August were 3.2% down on last year hasn’t helped the mood, which remains jittery.

Kit Juckes, currency analyst at Société Générale, writes:

Everything is considerably calmer. Asian markets saw gains for equities and for the won, the rupiah, the baht and in G10, the Australian and New Zealand dollars. But as Europeans arrive at dealing desks, the mood is hardly ecstatic and FTSE, CAC and DAA are all firmly in negative territory.

Risk sentiment may improved but not enough to drag the SG Risk Sentiment Indicator out of deep aversion (it’s at 0.13 on a 0-1 scale).

Joao Monteiro, analyst at Valutrades, agrees that traders are nervous:

There’s a lot of uncertainty in play early in the European session with traders evidently struggling as to how to call this market.

Industrial unrest has hit the eurozone today, with strikes hurting travellers in Germany.

In another sign of tensions in Europe’s largest economy, German pilots union VC widened its strike at Lufthansa this morning to include long-haul flights.

It will hit 1,450 flights and around 200,000 travellers, according to the BBC.

Unions are protesting against Lufthansa’s attemps to change their pension terms.

The walkout follows an ugly weekend on Germany’s rail network, where a strike over an unrelated pay dispute halted around two-thirds of inter-city trains. Not a great start to the school holidays.....

Japan’s stock market has posted its biggest jump of the year today, as fears over the global economy recede.

The Nikkei 225 index surged by 4%, or 578 points, to close at 15,111, helped by strong US consumer confidence data released on Friday.

Every share rose, with manufacturers leading the rally. Hitachi jumped 8%, NEC is up 6.5% and Mitsubishi gained 6.3%.

Shares were helped by the yen weakening against the US dollar, which should make exports more competitive.

Reuters explains:

The Thomson Reuters/University of Michigan index of consumer sentiment was surprisingly strong in early October, rising to more than a seven-year high. Other data also showed new housing starts rose more than expected last month, suggesting U.S. economic growth was solid.

The upbeat U.S. data has brought some calm to markets after a week of turbulence as signs of softening global growth roiled investors and sent volatility spiking.

Good morning, and welcome to our rolling coverage of the financial markets, the world economy, business and finance.

“What we have seen over the past week is financial markets catching up with the data. Possibly overreacting to the data but certainly catching up.....

So mused Andy Haldane, the Bank of England’s chief economist, on a trip to Coventry late last week.

And it looks like the catching-up job may be over, at least for a little while. European markets are expected to rise this morning, extending Friday’s recovery, and reversing a little of the recent rout.

Stan Shamu of IG explains:

After big gains on Friday, it doesn’t seem like we’ll have any major catalysts in today’s trade.

....There is also mild strength in the sterling on the back of comments by the BoE’s chief economist, who suggested markets may have overreacted to some recent weak data.

Here’s IG’s opening calls:

• FTSE 6336 +26
  
• DAX 8884 +34
  
• CAC 4034 +1
  
• IBEX 9930 -27
  
• MIB 18765 +64
  

Not much on the agenda; but the monthly report from the German Bundesbank, due around 10am BST, could be interesting.

Haldane’s full interview, published in the Observer yesterday, is well worth a read.

He’s gloomier about global, and UK, economic prospects -- but is encouraged when he gets out and actually speaks to business people in the real economy.

He also pines for a Star Trek-style console, putting all the data showing how the world economy is functioning at his fingertips.

“The absence of that global financial weather map has never been more harmful.”

Bank of England’s chief economist struggles with stance on Britain’s prospects

I’ll be (boldly) tracking all the main developments through the day as usual....